The Active Asset Allocation Portfolio utilizes a trend following strategy by buying and selling securities based on established price trends in each asset class, which is determined by comparing the current price with the 200 day simple moving average. Below is a snapshot of the current trends we are following:
US Equities:
We have been fully invested in this asset class since August. Trends have remained positive.
Foreign Equities:
If we were to slice this asset class into emerging markets and developed markets, we would see two different stories unfold (see other post) or this simple chart from Financial Times. We are watching some emerging market trends break down and hit the moving average. These positive trends were not very convincing in the first place and our holdings in this area are limited. Time will tell if the negative trends continue or if they will bounce off the 200-day moving average. Developed markets have a slightly better story although their trends remain flat to slightly positive. It should be noted, that these comments are generalizations. There are countries that are bucking the trends – we are looking at this asset class on a country by country basis. (Link to Finding a trend in Emerging Market Equities)
Bonds:
The trend continues to remain flat for the most part, which we noted at the end of the 1st quarter. The only exception are some securities that invest in emerging market debt which have been flat for several months, resulting in the moving average catching up to the current price. The trend is not conclusive, but it is a sign that it could turn negative.
Real Estate:
One of our longest held positions continues to perform very well. This asset class has had a few bumps in an otherwise positive trend that has existed for a few years.
Commodities:
Up until last week, many of the trends were flat to slightly negative. Then during last week, the price of gold and silver dropped. This had ramifications throughout the commodity market. Most of the securities we are tracking in this asset class are now below their average. Our positions at the time were minimal given most trends were already negative.